How do you go about making spending cuts as a family? I address this question often with clients who are parents. When little lives are in the mix, the challenge of reigning in spending is often amplified. But when you’re facing spending cuts, there’s a silver lining. It provides an opportunity to talk with your kids about money in a positive and formative way.

We need to be talking to our kids about money. Kids are constantly learning how the world works while under our roof, and giving them a solid understanding of and respect for money is an incredibly valuable lesson. I’ve created a brief guideline for talking to your kids about money, focused on making spending cuts.

Before we begin, let’s lay some groundwork. You kids should see two big characteristics modeled in you: contentment with today and confidence in tomorrow. Your contentment and confidence provides security, and your kids want security. They want to know “are we okay?”

Beyond wanting to know everything is “okay,” you can assume the following about most kids:

Your kids

Are curious about money

Pick up on money tension in the family

Can probably handle more information and truth than you expect

Want to hear from you

When you approach your kids to speak about money, have a goal for your conversation. Here is what I suggest:

Goal of your conversation

Unify your family

Explain why and how spending will change

Explain that no one is in trouble; put your kids at ease if they are worriers – make sure they know they’ve done nothing wrong

Make sure they know everything will be okay

Cultivate in your kids an early understanding of and respect for money

Give your kids an opportunity to ask questions and express their thoughts

I know these conversations are not always easy and you might be hesitant. It helps to keep in mind the upsides to talking about money. Here are just a few:

Upside of the conversation:

The opportunity to unify your family

Your kids will see an example of humility as your admit your past money mistakes

Upon paying off all of your debts your kids will get to share in your joy

It will be a valuable start to their own journey of learning how to act wisely with money

Your kids will feel respected and heard

Now we’re finally ready to talk about what you’ll actually say to your kids. Here are a few sample talking points to get you started. You’re the expert with your kids and will know how to tweak and customize the following to fit your child’s needs.

Talking Points:

We feel that you are mature enough to talk about our family’s finances

We’ve made some poor decisions about how we spend our money. We’ve been spending more money that we should.

We are committed to making better decisions and have a plan for how to do that

We need to spend a little bit less for the next year so that we can pay off our credit card

FOR OLDER KIDS: Do you understand how a credit card works?

It’s a loan (also called debt) – this means someone is letting us borrow money so we can buy things and then we pay them back later

Sometimes it’s good to have debt. For example, when you go to school, buy a home, or start a business, a loan can be a good and helpful thing. We have used loans for these things and it’s been a good thing for our family and we are paying all of those loans back.

Sometimes debt is not good – it makes you feel like you have more money than you really do so you buy more things than you should and you can’t pay the money back to the person you lent it to you.

Here’s our plan:

We’ll be eating out less. To put a positive spin on the changes, you can try to excite and engage them with a vision of how the change will be good or fun to try (e.g., you can help us pick out new recipes to try together at home).

Vacation this year might look like this instead of that

We are going to give you the opportunity to become smart about money with us. You will continue to get your allowance and you will get to buy your toys and gifts for friends with your allowance. (If you do gifts for birthdays and holidays you could tell your kids that these types of gifts will still come from mom and dad. Ahead of these events, if spending will be less than usual, you can give them a heads up and help them prioritize their wish lists.)

Do you have any questions or concerns?

This is family business – or however you word “don’t share this on the playground.”

Once you’ve had your first conversation about money, reinforce your words with healthy behaviors and attitudes about money. I encourage you to do the following:

Beyond the first conversation:

Resist the urge to complain about not having enough money, especially around your kids

Don't point blame toward anyone about overspending or the current state of your finances